United Healthcare 2005 Annual Report Download - page 32

governing the convertible notes. The compensation consisted of the present value of interest through October 18,
2007, the earliest mandatory redemption date, plus a pro rata share of $1 million. On January 31, 2006,
approximately 91% of the convertible notes were tendered pursuant to the offer, for which we issued 4.8 million
shares of UnitedHealth Group common stock and cash of $99 million.
Our debt arrangements and credit facilities contain various covenants, the most restrictive of which require us to
maintain a debt-to-total-capital ratio (calculated as the sum of commercial paper and debt divided by the sum of
commercial paper, debt and shareholders’ equity) below 45% and to exceed specified minimum interest coverage
levels. We are in compliance with the requirements of all debt covenants.
Our senior debt is rated “A” by Standard & Poor’s (S&P) and Fitch, and “A2” by Moody’s. Our commercial
paper is rated “A-1” by S&P, “F-1” by Fitch, and “P-1” by Moody’s. Consistent with our intention of
maintaining our senior debt ratings in the “A” range, we currently intend to maintain our debt-to-total-capital
ratio at approximately 30% or less. A significant downgrade in our debt or commercial paper ratings could
adversely affect our borrowing capacity and costs.
Under our board of directors’ authorization, we maintain a common stock repurchase program. Repurchases may
be made from time to time at prevailing prices, subject to certain restrictions on volume, pricing and timing.
During the year ended December 31, 2005, we repurchased 53.6 million shares at an average price of
approximately $48 per share and an aggregate cost of approximately $2.6 billion. As of December 31, 2005, we
had board of directors’ authorization to purchase up to an additional 55.5 million shares of our common stock.
Our common stock repurchase program is discretionary as we are under no obligation to repurchase shares. We
repurchase shares because we believe it is a prudent use of capital. A decision by the company to discontinue
share repurchases would significantly increase our liquidity and financial flexibility.
We currently have a $4.0 billion universal S-3 shelf registration statement (for common stock, preferred stock,
debt securities and other securities) which has been declared effective by the SEC. In addition, we are considered
a “well known seasoned issuer” under the Securities Offering Reform Act that became effective in December
2005. We have not yet issued any securities under this shelf registration statement. We may publicly offer
securities from time to time at prices and terms to be determined at the time of offering. We intend to issue debt
securities during the first quarter of 2006 to refinance some or all of the commercial paper currently outstanding.
Under our S-4 acquisition shelf registration statement, we have remaining issuing capacity of 48.6 million shares
of our common stock in connection with acquisition activities. We filed separate S-4 registration statements for
the 72.8 million shares issued in connection with the February 2004 acquisition of MAMSI, the 104.4 million
shares issued in connection with the July 2004 acquisition of Oxford and the 99.2 million shares issued in
connection with the December 2005 acquisition of PacifiCare described previously.
30